Summary and Recommendations

Summary

The South Caucasus, comprising the three states of Armenia, Azerbaijan, and Georgia, is a region plagued by unresolved ethnopolitical conflicts, political instability, and protracted economic crisis. The region is beset by poverty, corruption, slow political and economic reforms, large refugee and IDP populations, grave environmental problems, and scant respect for human rights and the rule of law. Surrounded by the three regional powers Iran, Russia, and Turkey and located on the crossroads of Europe and Asia, the South Caucasus has also been at the center of post-cold war geopolitical rivalries. To a considerable extent, the significant oil and gas reserves in the Caspian sea, specifically in the Azerbaijani sector, have amplified regional rivalries for political and economic influence in the region.

The South Caucasian states acceded to independence in the early 1990s on a wave of anti-Soviet popular and nationalist movements that abortively attempted to establish democratic forms of government, while being bogged down into ethnic warfare with minority populations and/or neighbors. These wars worsened the economic recession in the region, and led to the revival of authoritarian tendencies in society. By the late 1990s, the region had achieved some stability, but at the cost of democratic setbacks and three unresolved ethnopolitical conflicts frozen along cease-fire lines. In spite of increased international attention and attempts to resolve these conflicts through negotiations, none of the three is close to a solution. To differing degrees, these three conflicts are all at risk of erupting again in a violent manner; moreover, ethnic tensions elsewhere in the region exist that are at a risk of escalation.

The South Caucasus is in deep political and economical crisis. Armed conflict and economic collapse following the Soviet breakup have confined over half of the population of the region to poverty. Health care and education systems have suffered greatly from the economic collapse, and living standards have fallen considerably. Corruption in all spheres of society has become rampant and may today pose the largest single threat to the functioning of the three states. Judicial reform has begun but is far from satisfactory, and none of the states has established a reliable system of government based on the rule of law. In the decade since independence, civil society has grown, but remains heavily dependent on foreign (i.e. western) support and funding. A relatively free print media has been able to develop, although it remains under heavy state pressure. Broadcast media is significantly more controlled.

Economic reforms have been undertaken but have so far failed to create a truly investment-friendly environment. Some foreign investment has reached the region, but mainly in the oil and gas sector, which generates little employment and gives little impetus to other sectors of the regional economy. Massive unemployment pervades the region, and the economic recession has especially hit women harshly. Large environmental problems, mainly dating back to the Soviet era, have not been addressed, threatening public health in the Caucasian states.

In the political realm, all three states have become members of the Council of Europe, though all three fail to meet the standards of democratic rule of this organization. While democratic progress has been made since independence, the Caucasian states are at best semi-democratic with strong authoritarian traits. Political violence has been a constant threat in the three states since independence, as all have experienced coups d’etat, insurrections, or attempts to assassinate political leaders – threats that are still present today. The states of the Caucasus are weak, and institutions have not developed to an extent that has overcome the focus on personalities that continues to dominate politics. This increases the danger of the looming succession crises in Azerbaijan and Georgia, which threaten to plunge these states into unrest once the present Presidents are out of power.

Instability, the presence of uncontrolled territories, and corruption have led to the increased influence of transnational crime in the South Caucasus. Crime networks are well-connected with adjacent regions, including the North Caucasus, Central Asia, and the Middle East. The region has become a key transiting point for the illegal trade in arms, narcotics, and persons, which have acquired threatening proportions both to the security of the three states and to their citizens. These networks also have well-established links to government officials; the narcotics trade in particular has a strong corruptive effect on the region, and worsens health problems as drug addiction is rising. Moreover, poor socio-economic conditions and the proximity of the war in Chechnya have fueled the rise of extremist ideologies, including radical Islamic movements.

These domestic and transnational problems have been exacerbated by geopolitical rivalries among regional powers surrounding the region, which have taken advantage of the Caucasian conflicts to secure their own influence over the regional states and especially over energy resources and their transportation. Russia has played the most negative role, as it actively engaged in the secessionist conflicts of the region in order to weaken the independence of the South Caucasian states. Iran, Turkey and the United States have also sought to maximize their influence in the region.

The Caucasus was one of the regions most affected by the reshuffle in world politics after the terrorist attacks of September 11, 2001. The strategic position of the South Caucasus between Europe and Central Asia gained further attention during the war in Afghanistan, and American military and political involvement in the region has gradually increased. This has a potential to stabilize the region, but uncertainty regarding America’s aims and objectives in the region in fact add uncertainty and unpredictability to regional politics.

The regional situation in the South Caucasus is conflict-prone and inherently unstable as a result of several interrelated factors. Weak state structures breed corruption, incapacitate law enforcement, prevent tax collection, and lessen governments’ legitimacy and control. Socio-economic problems create poverty and frustration and dangers of social reactions against mismanaged governments; and a weak political culture prone to nationalism and the personalization of politics breeds fragmentation and the risk of aggressive populism. Meanwhile, state weakness is exacerbated by regional powers, and transnational criminal or subversive groups that take advantage of state weakness, corruption and public frustration to operate in the region, increase their control over state structures, and gain followers. This situation breeds numerous risks to the security of the region, the main ones being the following:

- The risk of renewed war between Armenia and Azerbaijan is gradually increasing as negotiations are deadlocked and popular and elite frustration over the occupation of Azerbaijani territories is rising in the country. If negotiations yield no results, a renewed war may occur especially during or after a transition of power in Baku. Given more sophisticated armament, a new war is likely to be of a much larger scale than the one a decade ago. The regional implications of a renewed military confrontation are also immense, as several great powers, including Russia and Turkey, are tied militarily to the two states.

- The risk of an armed conflict in Georgia’s Armenian-populated Javakheti region is also a clear and present danger to Georgia’s stability and regional security. Javakheti remains politically, economically and culturally isolated from Georgia, and several incidents have shown that strong mistrust for Tbilisi exists in the region. The central government does not exercise effective influence in Javakheti. Armenian Diaspora groups have also increasingly begun to raise the issue of Javakheti autonomy. A potential armed conflict between Georgian and ethnic Armenian groups in Javakheti could rapidly involve official or unofficial forces in Armenia, and potentially lead to a confrontation between Armenia and Georgia; moreover, such a confrontation would upset the balance between Armenia and Azerbaijan and may lead to a resumption of hostilities there. In sum, Javakheti could in a worst-case scenario be the starting point for a general South Caucasian war.

- The conflict in Abkhazia has been the most unstable of the frozen conflicts in the region, with continuing guerrilla-type low intensity conflict and major unrest both in 1998 and 2001. The U.S.-funded train and equip program in Georgia, while playing a fundamentally stabilizing role, may tilt the military balance in favor of Georgia and lead to a temptation in Tbilisi to use the newly trained troops to reassert control over Abkhazia.

- The issue of political succession has been looming in both Azerbaijan and Georgia for several years. When ageing Presidents Aliyev and Shevardnadze are no longer in power, a fundamental element in the stability of these countries will disappear. Struggles for power, with possible external interference, are likely to emerge especially if entrenched ruling elites refuse to step down. Whether these succession struggles will remain peaceful and according to democratic principles is doubtful, prompting fears of civil unrest tearing these countries apart.

- Russia’s ambitions in the South Caucasus are unclear. While Moscow under President Vladimir Putin has improved relations with Azerbaijan, Russia has continued to exert hard pressure on Georgia, cutting gas supplies for political reasons, implementing a discriminatory visa regime that exempts secessionist regions, extending Russian citizenship to inhabitants of these regions, and demanding to intervene militarily in the Pankisi gorge. There is a possibility that circles in Russia may seek to intervene militarily to sustain Russian influence over the South Caucasus, most likely within an alleged terrorism framework.

- The rise of Islamic consciousness in Azerbaijan and Muslim-populated parts of Georgia has progressed ever since independence. While Islamic radicalism presently has little public base in the South Caucasus, it is continuously fed by a series of factors, including proximity to the war in Chechnya; dire socio-economic conditions and growing income disparities; and semi-authoritarian state structures. There is a risk that radical Islamic forces will gradually gain popularity in the region.

Recommendations

General Long-Term Recommendations

· A Regional Approach. Any effort at long-term development assistance and conflict prevention in the South Caucasus needs to be of a regional character. In spite of historical, linguistic and religious differences and partly contrasting foreign policy orientations, the three states of the South Caucasus share similar problems and face similar difficulties in overcoming them. The South Caucasian states form a clearly delimited and self-conscious region, and all three countries are intimately aware of ongoing processes in their neighborhood. In the long run, the Caucasus can only develop and prosper through interaction among the three states, and interaction with the rest of the world, particularly Europe. The interconnection is most obvious in the field of security, as the South Caucasian states are interwoven in a single complex set of territorial conflicts, subjected to the influence of the same regional powers, and affected by the same trend of increasing transnational crime. Conflict management and conflict prevention in the South Caucasus is necessarily regional, as no conflict in the region can be understood in detachment from its regional environment. The failure of negotiations is in part due to the lack of a regional approach in conflict management efforts.

· Economic Cooperation and Conflict Resolution. In the long term, the improvement of regional trade is crucial to durable peace and prosperity in the region but is frustrated by the deadlock in ethnopolitical conflicts. The link between economic cooperation and conflict resolution is debated. For example, it is often argued that regional cooperation and economic interaction between Armenia and Azerbaijan would help improve mutual confidence and lead to peace. The attraction of economic benefits in conflict resolution is often grossly overestimated, as the continued conflict between China and Taiwan despite large-scale economic interaction has proven. Continued economic hardships have not changed determination in Armenia and Mountainous Karabakh to sustain the course of independence, and polls show Azerbaijanis care much more about symbolic issues regarding the conflict than economic benefits. The conflicts in the Caucasus are not about economics but center around territory and issues of symbolic and emotional value, and people on all sides place economic on the bottom of their lists of priorities. It is therefore unrealistic to assume that Azerbaijan would open trade links with Armenia as long as its territories are occupied, and efforts to promote this are doomed to failure; moreover, the South Ossetian example has shown that economic contacts in the legal vacuum that an uncontrolled territory represents merely risks leading to increasing smuggling. Economic reconstruction is a necessary part of conflict resolution but economic incentives has proven a poor way of producing a change of mood in the conflicting parties. The economic dimension needs to be further and more concretely incorporated into the process of conflict resolution and the work of negotiators, but efforts to solve these conflicts must focus on altering the images of the ‘other’ that parties to conflicts have, and promote solutions that address the actual issues in these conflicts: security, symbolic politics, and national pride.

· Cooperation among Donors. In spite of its small size, the South Caucasus is receiving relatively large amounts of development assistance. These amounts are in proportion to the needs of the region; indeed, USAID and the World Bank, for example, have projects with multi-million dollar budgets. However, coordination between international organizations or aid agencies is often insufficient, leading to confusion among recipients and skewed or incomplete results. The addition of new assistance to the Caucasus should hence seek to coordinate with existing programs and projects of international organizations or individual countries’ aid agencies. A more detailed survey of ongoing programs and their results could provide a good picture of worthwhile projects.

· Integrating the Local Context. While designing and planning assistance, it is crucial to elaborate programs in view of the local context and with an understanding of local conditions, mentalities, and values. Programs that have succeeded in other countries or continents are frequently brought to the South Caucasus with very little contextual changes, therefore ignoring local conditions and therefore failing to reach their objectives. One way of addressing this danger is to involve experts and beneficiaries in the decision-making process.

· Building Long-Term Partnerships. In order to prove commitment to the region, long-term partnerships need to be developed with state and non-state institutions in the region. These partnerships are especially essential for encouraging the development and capacity-building of non-governmental organizations.

Recommendations for Development and Governance

· Institution-Building and the Rule of Law. A main threat to stability in the South Caucasus is the weakness of institutions and the dominance of personalities in politics. While this problem is likely to be a durable one, a major challenge is the building and strengthening of the rule of law in the South Caucasian states. Membership in the Council of Europe has brought a strong lobbying force that can be used as a background for strengthening the divisions of power, the independence of the judiciary, and the rights of citizens versus the state. Support for and development of the institution of ombudsman is one concrete way in which this can be promoted.

· Corruption. Due to poor socio-economic conditions, low salaries, widespread impunity and enduring Soviet patterns and mentalities, corruption is rampant in all walks of life in the South Caucasus. Corruption impedes investment and economic development, and increases frustration and thereby attraction to extreme ideologies among the population. Judicial reform needs to target corruption; the independence of the judiciary needs to be strengthened; and officials trained to reduce it. Ratification of the Council of Europe Criminal Law Convention on Corruption, and Civil Law Convention on Corruption, as well as bringing present legislation in accordance with the Conventions, is crucial. In addition to working to strengthen the judiciary, a simultaneous step needed to overcome rampant corruption is to introduce a trustworthy ombudsman program. Combining external advisors, government officials and representatives from the community, such a program would be the first step to reporting – at the onset – all forms of low-level corruption, thus seeking to slowly eliminate the widespread mentality that paying bribes (or giving gifts) is normal behavior. Local and international experts have recommended the establishment of a co-ordination mechanism involving all agencies and departments involved in the prevention, detection, and investigation of corruption. The experts also recommended that all Government Departments and Agencies introduce internal inspection units similar to that created in the Ministry of Tax Inspection. The inspection unit headed by an Inspector General appointed directly by the President has been able to develop various procedures designed to examine the causes of and to prevent corruption. The introduction in all departments and agencies of external monitoring councils is desired. The experts have proposed use of the Information Agency on Property and Financial Declarations as a source of information to be used in a pro-active way to detect and investigate possible corruption cases, and establish a mechanism for testing the accuracy of income declarations made by public officials.

· Encouraging Trade. In the South Caucasus as in Central Asia and Afghanistan, development assistance tends to neglect the one measure most likely to alleviate poverty: the development of the private sector and the reconstruction of ancient trade routes. The South Caucasus lies on ancient trade routes that have only been reestablished in the abstract; the EU’s TRACECA project shows an understanding of this, but the project has lost momentum. The South Caucasus is at the navel of a vast network of potential trade and transportation routes between both north and south and east and west. The reconstruction of these routes, with measures to endorse private entrepreneurship, could unleash a large infusion of trade and investment which would create job opportunities, alleviate poverty, and distract people from nationalism or religious extremism. Support is hence needed for judicial reform to facilitate private business and promote free trade, and for initiatives to expand trade routes.

· Improving Access to Healthcare. In the overall very limited public spending on the health sector, the provision of even primary health care to the vast majority of the population remains a major problem. State budget reductions in the health sector resulted in low and highly unequal access to health care spending: ca. 30% of the population has almost no access and ca. 50% has only limited access, especially in rural areas. There is a need for resources to be spent for investments and supplies in the health sector, as well as for funding specific health programs in the areas that are most affected. Support for the establishment of medical insurance programs can have a major impact for the elimination of inequality in access to medical care.

· Eliminating Poverty and Micro-Credit. Since 1992-93, international organizations have covered huge numbers of beneficiaries thorough humanitarian aid, mainly to IDPs. The states of the South Caucasus are no longer receiving emergency humanitarian aid, yet more than half of the population lives under the poverty level. There is a need for micro-credit projects that will provide small grants to poor communities, especially in the rural areas, to build or rehabilitate small-scale business or agricultural infrastructure. This will help increase household incomes and reduce poverty and vulnerability. The Vulnerability Assessment and Mapping undertaken by the UNWFP in Georgia can be used for targeting the poorest.

· Balancing Security Concerns and Personal Freedoms. Although human rights abuses remain a problem in the South Caucasus, external actors need to understand the intricacies of balancing personal freedoms with security concerns. As such, it is essential to develop policies towards countries in the South Caucasus that do not ignore either factor, but seek to balance the two as effectively as possible. It is essential that policies aimed at the South Caucasus connect economic, political, security and social issues; while unifying aid, diplomatic and security initiatives. It is essential that programs aimed at promoting security (such as military aid) simultaneously provide for associated economic, social and political guarantees made by the governments. In sum, the donor needs to be seen as being interested in securing the territorial integrity and sovereignty of the state; but must also while doing so secure the future of the local population.

· Strengthening the Independent Media. The independent print media and the emerging independent broadcast media are one of the main achievements of efforts to build open societies in the South Caucasus. Support and capacity-building for the free media in the form of training seminars for journalists and perhaps the establishment of media institutes in the three capitals to improve journalistic standards would further consolidate the independent media.

· Sustaining Education. Like all former Soviet States, the South Caucasian societies have universal literacy and high levels of education. However the decade since independence has brought the worsening of educational standards, risking to decrease the intellectual potential and the skilled labor force that is one of the region’s comparative assets. Assistance to the educational sector, especially secondary and higher education, in the region is hence crucial. Support for exchange programs of both students and faculty have proven to be a leading method of increasing capacity n the region, but also more broadly of cementing and developing the contacts between these societies and the west.

Recommendations for Conflict Prevention

· Strengthening Civic Consciousness. One major factor that escalated the conflicts in the South Caucasus in the late 1980s was the predominance of ethnic as opposed to civic concepts of the nation. Ethnic and exclusive concepts of nation inhibited coexistence and strengthened demands for political control over territory by minorities, and of dominance by majorities. Ethnic nationalism can only be effectively counteracted if the national identities of the three states develop away from ethnic- and blood-based identities in the direction of civic- and citizenship-based criteria for membership in the national community. This aspect should be incorporated in the building of institutions and, wherever possible, the drafting of laws, a task in which development assistance can support its inclusion.

· Containing Transnational Crime. The growth of transnational crime is a neglected but potentially grave threat to the states and societies of the South Caucasus. The dividends available – especially in the narcotics trade but also the illicit trade in arms and persons – generate large-scale and high-level corruption, risking to capture parts of or entire state institutions or regions. Moreover, smuggling across uncontrolled territories impedes conflict resolution on all sides as officials benefit from illicit activities, and in society drug consumption is rising, leading to increasing criminality and public health problems including HIV. Transnational crime in the South Caucasus also directly affects western European countries. Yet the transnational crime scene in the South Caucasus is poorly understood. Assistance needs to be geared toward containing and combating transnational crime, and for that purpose its patterns need to be studied in more detail.

· Promoting Integration and Opposing Ethnic Segregation. Given the recent nature of statehood and democratic governance in the South Caucasus, some elements of western democracy such as the granting of autonomy to minority groups risk being extremely counterproductive. Until national statehood has been consolidated, strengthening of local self-rule, especially in ethnic minority areas, is likely to have a divisive and fragmenting effect on the region. It also strengthens the connection between ethnicity and territory that directly contributed to the emergence of ethnic warfare in the late 1980s and early 1990s. In its place, integration of minorities in the national polity and economy should be encouraged.

· Conflict Prevention in Minority Areas. Tensions in minority areas threaten peace and security in both Georgia and Azerbaijan, and risk to do so even more during periods of uncertainty such as times of political succession. Efforts to improve the socio-economic conditions in minority areas are crucial to attenuating perceptions of discrimination among minorities. Planning of development assistance must hence ensure that minority areas are not marginalized. In addition, promotion of dialogue and debate among NGOs in minority areas and the capitals could significantly improve mutual understanding among ethnic groups.

· Public Diplomacy. One way of bringing the populations and elites of the South Caucasus together is through encouraging various forms of dialogue. The “Space Bridge” television program is an example of this, as are various forms of second-track diplomacy and student exchange programs that have been funded and carried out over the years. The difficulty in elaborating such programs are the selection of candidates to achieve a maximum effect in the target societies. For this purpose, working with graduate students, NGOs, and the media may be the best way of having an impact throughout society. Another opportunity is to organize the reunion or meeting of mixed families that were divided as a result of conflict, something that has not been done so far.

· Regional Environment. There a number of areas in the field of environment protection that are suitable for regional cooperation in the South Caucasus. They are transboundary water and air pollution. Despite the fact that there are a number of projects that address transboundary water issues, there are numerous gaps and issues that need to be timely addressed to avoid conflict situations between the countries. The capacity of institutions dealing with the issue is weak, legislation is underdeveloped,

· Javakheti. The Javakheti region is perhaps the most crucial single region in the South Caucasus today, given the relatively high tensions in the area, its isolation from the rest of Georgia, and not least the devastating implications that a conflict in Javakheti could have both for Georgia’s statehood and for peace in the entire Caucasus and beyond. Ethnic tensions in Javakheti need to be reduced, and the most feasible way of achieving that is through the integration of Javakheti with the rest of Georgia economically. A concrete way of promoting this is through the restoration of the Tbilisi-Akhalkalaki road. Today, travel between Tbilisi and Javakheti takes place over Akhaltsikhe to the west instead of directly. The reconstruction and expansion of communications would immediately change the economic conditions of Javakheti, enabling its integration with the rest of Georgia, and thereby both the improvement of the economic situation in the region and the lessening of mutual suspicion and fear between Georgians and Armenians.

· Pankisi. The Pankisi gorge, with the presence of transnational crime networks, Islamic radicals, and Chechen fighters is an explosive region, and the primary possible justification for a Russian intervention. Any attempt to ‘root out’ terrorism and crime in Pankisi must be done extremely cautiously, and without alienating the groups of Kists, Georgians and Chechen refugees – all of which need to be enticed into establishing and preserving security in the gorge via diplomatic means, or an anti-crime initiative that simultaneously provides a long-term development program.

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